Bankers meet residents to hear the truth about financial exclusion

The conference, in London, marks the publication of the report from a unique project for the Joseph Rowntree Foundation. Researchers asked local people in Barton Hill, Bristol - a ‘Pathfinder’ area for the Government’s New Deal for Communities programme - to identify their needs for financial services. Local people and workers were then given the opportunity to cross-examine bankers, credit unions and other providers about the products and services they offered at two all-day ‘select committee’ meetings.

An estimated 1.5 million households in Britain (7 per cent) have no bank account and make no other use of other High Street financial services. Another 4.4 million households (20 per cent) are on the margins of financial exclusion, with little more than a bank or building society account that is seldom used. The research among Bristol residents found that:

• There was widespread mistrust of banks, insurance and credit companies and a high level of disengagement from high street financial services. People welcomed the development of basic bank accounts that could not be overdrawn, and were available to everyone without the need for credit scoring checks.
• People aspired to save, and wanted simple, secure savings accounts. They felt that banks and building societies were not interested in the very small sums (often in loose change) they could afford to put aside.
• Borrowing was a fact of life for residents whose limited access to credit included door-to-door moneylenders charging high rates of interest, as well as mail-order catalogues and the Benefits Agency’s Social Fund. People wanted to know whether their neighbourhood had been ‘blacklisted’ by lenders and were interested in finding ways of breaking out from the cycle of using high-cost credit.
• Self-employed sole traders in the neighbourhood (so-called ‘micro entrepreneurs’) needed to borrow working capital, but had encountered difficulties in their dealings with banks.
• Adults and young people felt gullible in dealing with financial services providers and were interested in taught courses and interactive computer programmes to increase their confidence about financial issues and help them with money management.
• Residents from the Somali community in Barton Hill faced particular problems as most financial services do not comply with the teaching of Islam, which forbids the payment or receipt of interest as well as the use of insurance.

The ‘select committee’ meetings enabled financial service institutions and community finance providers to tell local people and workers about a range of existing and proposed services that could meet their needs. The research team from the University of Bristol’s Personal Finance Research Centre concluded that:

• The financial needs of deprived communities are best met by a combination of national institutions maintaining a local presence, and a city-wide network of ‘one-stop shops’ run as partnerships by national providers and local organisations. Two high street banks said they were keen to work with local organisations to find ways of widening access to financial services.
• Local people should be consulted and involved at every stage when designing and developing new financial services.
• In addition, there needs to be a strong local organisation - such as a housing association, community organisation or a regeneration company - to work with national bodies.
• Financial service providers must be sensitive to the needs of religious and cultural minorities. In addition, products such as basic bank accounts will need to be marketed sensitively in order to overcome the considerable mistrust and antipathy expressed by local people towards banks and other financial institutions.

Sharon Collard, co-author of the research, said: “We are encouraged that this unique attempt to consult financially-excluded residents about their needs has proved so positive - not least in the response from banks, building societies, credit unions, micro-lenders, local government and everyone else who took part. We hope they will continue listening to local people as they develop their plans.

“Residents were very interested in the new products they heard about, such as the Post Office proposals for ‘Universal Banking’. They were also encouraged by the innovative steps taken by local organisations, such as debt ‘buy-out’ schemes where credit unions have helped members to pay off loans with door-to-door moneylenders.”